Could an FDIC or RTC property manager issue an exemption certificate without giving the retailer its title and agency records?

Plain-English summary

A management company acting for the FDIC sought tax refunds and guidance for future purchases. The earlier May 30 letter required an assignment of refund rights from COMPANY A, proof of when title passed to the FDIC, and a copy of the agency contract. Alternatively, the manager could obtain the refund from COMPANY A by giving it the ownership and agency documents with an exemption certificate.

The June 24 letter changed the procedure for future purchases. A management company that retained proof of the FDIC/RTC's title and a written purchasing-agency agreement could issue an exemption certificate for tax-free items incorporated into or used on the managed property. The certificate had to say the purchase was made by or for the FDIC/RTC and could be signed by the manager or the FDIC/RTC.

The manager no longer had to give the retailer copies of the title and agency documents. A retailer accepting a properly completed certificate in good faith was relieved of liability for the tax.

What this means for you

This 1991 letter separated the retailer's certificate file from the manager's supporting audit file. The protection stated for the retailer depended on accepting a properly completed exemption certificate in good faith.

Common questions

What purchases could the manager cover? Tax-free items incorporated into or used on FDIC/RTC-owned managed property.

What records did the manager retain? Proof of title transfer and the written agency agreement.

Did the retailer need copies of those records? No under the revised policy.

What protected the retailer from liability? Good-faith acceptance of a properly completed exemption certificate.

Citations and references

• No statute or administrative rule was cited in the letter.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9106L1116F14

Original ruling text

June 24, 1991

Dear **:

This is just to let you know that we have slightly changed our policy
with regard to issuing exemption certificates to cover purchases for the
FDIC/RTC. We are now asking that a management company has the following
information on hand in case of an audit:

1. documentation from the FDIC/RTC showing that title to the property
   being managed has actually been transferred to the FDIC/RTC, and

2. a written agreement between the FDIC/RTC and the management company
   that designates the management company as the FDIC/RTC's agent and
   authorizes the management company to make purchases on its behalf.

If the management company has this information on file, it may issue an
exemption certificate to purchase tax free items that are incorporated into
or used on the property being managed. The certificate must state that the
purchases are made by or for the FDIC/RTC and must be signed by the
management company or the FDIC/RTC.

This information differs from that I previously sent you in that you no
longer have to give copies of items 1 and 2 to the retailer. A properly
completed exemption certificate accepted in good faith will relieve the
retailer of liability for the tax.

If I may be of further assistance Please do not hesitate to write or call
me at 1-800-531-5441, ext. 3-4677 or 512-463-4677.

Sincerely,

Lucy Glover
Manager, Tax Administration Division

May 30, 1991

Dear **:

Martin Cherry referred your letter of May 10, 1991 to me. He and I have
discussed your request and agree that for refunds we need the following:

• An assignment from Company A of the right to receive tax paid to the
  state by Company A.

• Documentation of when title to the properties passed to the FDIC

• A copy of the agency contract between you and the FDIC.

Instead of getting an assignment from COMPANY A you may get the refund
directly from them by providing the above documentation along with an
exemption certificate. I am notifying COMPANY A that this is what they
need in order to refund the tax. They can then get the tax back from us
or take a credit on a current return.

We are also telling COMPANY A to request the above documentation in the
future before accepting an exemption certificate from the FDIC or RTC.

If I may be of further assistance please do not hesitate to write or dial
me at 1-800-531-5441, ext. 3-4677 or 512-463-4677.

Sincerely,

Lucy Glover
Manager, Tax Administration Division